Forty thousand people in Windsor and Essex County work in manufacturing, 80 per cent in the auto industry.

Up Highway 401, in the London area, manufacturing accounts for another 30,000 jobs. That includes thousands in the auto parts industry, with more spread up and down the highway east and west of the city at parts factories that feed Big Auto in Southwestern Ontario.

Now, roll in the thousands more employees at the two big auto plants east of London — Toyota in Cambridge and Cami Automotive in Ingersoll.

The result? The region’s reliance on the export-driven auto industry — its big customer, the United States — grows even larger.

More than any other region of Canada, Southwestern Ontario lives and dies by the access to the giant American market that the North American Free Trade Agreement (NAFTA) provides.

In the Windsor area alone, 80 per cent of what its auto industry produces is exported to the U.S. under NAFTA.

More than 6,000 residents — more than four times the number anywhere else in big-city Canada — cross the border daily to work in the U.S. under NAFTA.

But with the sixth round of NAFTA renegotiations starting next week in Montreal, many expect the U.S. to withdraw from the deal that’s driven trade between Canada, the U.S. and Mexico for 24 years, the deal that the auto industry is based on.

That’s made Southwestern Ontario — what one report calls Big Auto’s “epicentre” in Canada — ground zero for the fallout of any American withdrawal from the continental trade treaty, and the many questions being asked as the troubled trade talks resume Tuesday.

An American pullout from NAFTA “would be disastrous,” says Jonathan Azzopardi, president of mould maker Laval International in Tecumseh, near Windsor.

“There’s no other way really to put it,” he said. “That’s our biggest partner, and we can’t afford to have them turn their back on us.”

U.S. President Donald Trump said last February he wanted to “tweak” NAFTA.

Now, the U.S. wants half the content of vehicles made in Canada and Mexico to be American. It wants more access to government contracts in Canada and Mexico, but more restricted access to government contracts in the U.S. It doesn’t want a mechanism to resolve disputes. And it wants to renegotiate any new agreement in five years.

“Wholly unworkable,” is how Canada’s chief negotiator, Steve Verheul, has described some U.S. proposals.

It’s a negotiation unlike any other. The point of trade deals is shared objectives and reducing barriers. Not this one: It’s America First, as America turns inward.

If the U.S. withdraws, NAFTA will expire in six months. Then, said Azzopardi, “and I’m not telling you this to get everyone in upheaval, it’s almost like it’s going back to the wild, Wild West.”

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No one knows what will happen.

Will the U.S. Congress, facing mid-term elections in November, try to block withdrawal?

Would we revert to the 1989 Canada-U.S. Free Trade Agreement? Or World Trade Organization rules?

Or would all three countries negotiate new, bilateral deals?

There is no road map for withdrawing from a trade agreement on this scale.

Reverting to WTO tariffs “would leave Canada unequivocally worse off than under NAFTA, but it would not be a disaster,” concludes a study by the Bank of Montreal. The gross domestic product would be one per cent lower than it would otherwise be. The loonie would fall five per cent to 74 cents US. Consumer prices would rise 0.8 per cent. But policy makers, businesses and markets would adjust.

Industries and regions that rely on exports to the U.S. would be affected most, the report states. The transportation equipment industry, which includes the auto sector, relies on exports to the U.S. more than almost any other industry and would be “one of the hardest-hit.” The auto industry here is so highly integrated with that of the U.S. and Mexico, that parts to produce one vehicle cross the border up to seven times.

Companies couldn’t supply their plants if borders became barriers.

Even auto dealers would be “highly affected” because the cost of vehicles could jump by more than US$1,000, which would “weigh noticeably on consumer demand” and “squeeze dealership margins.” Deliveries to dealerships likely would be delayed because of more regulations.

Ontario is the most vulnerable province “by far” because 83 per cent of its exports go to the U.S., the report states. Twenty-six per cent of the province’s GDP is tied to its exports to the U.S. And 80 per cent of those exports are from vulnerable industries like transportation equipment, worth a “whopping” $79 billion a year. In total, vulnerable exports to the U.S. make up 20 per cent of Ontario’s GDP.

“Indeed, the tightly integrated auto sector is probably the key area of concern for (the) province,” says the report, which also cites the impact on other sectors that feed off auto, like steel and plastics, creating spinoff jobs.

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No NAFTA would cost Canada $14.5 billion in economic welfare, a combination of the reduction in wages and increase in prices, according to a study by the C. D. Howe Institute. Canada would lose 25,000 to 50,000 jobs in the long term. Temporary unemployment during “a possibly long adjustment period” could “add very significantly to these losses.”

And certain sectors, including auto, will suffer “billion-dollar hits” to exports, the report says. Total sales in auto, chemicals, rubber and plastics will fall by as much as $4 billion.

On the front line are Windsor and Essex County, part of the biggest cluster of vehicle, parts and tool and mould makers in North America, a highly integrated, binational economy with southeastern Michigan and beyond.

Canada’s auto industry has become increasingly concentrated in two regions, Windsor-Essex and the 401 corridor between London and Toronto, says a study by McMaster University’s Automotive Policy Research Centre. They’re the industry’s “epicentre.” Fiat Chrysler’s Windsor minivan plant, with more than 6,000 employees, is the biggest manufacturing plant in Canada and produces the second most vehicles. Windsor-Essex also has a high concentration of the almost 400 parts suppliers in Ontario.

“Clearly, because of how integrated we are with the U.S. economy, (the end of NAFTA) will be quite a significant impact,” said Rakesh Naidu, chief operations officer of WindsorEssex Economic Development Corp.

The 2.5 per cent WTO tariff on Canadian vehicles and parts exported to the U.S. “won’t be an ideal situation,” he said. But local companies invested significantly in efficiency and improvements after the recession, so they’re better able to absorb it.

The development corporation isn’t considering other factors, said Azzopardi. WTO tariffs for tools and moulds are 4.4 per cent. And will Trump flout WTO rules, Azzopardi asked. Canada could complain and wait for a decision, but in the meantime, companies won’t invest.

“One of the main things Canada has is a great trade agreement with the biggest consumer in the world,” he said.

Jonathan Azzopardi, president of Laval International, says an American pullout from NAFTA “would be disastrous.” (DAN JANISSE/Postmedia News)

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Auto manufacturers, already not building new plants in Canada, will never build here and have little motivation to invest in existing plants without NAFTA, Azzopardi predicts. Some could consider moving production of more vehicles out of this country.

Tier 1 suppliers, such as Magna’s Integram Windsor Seating, Flex-N-Gate and others, who employ an estimated 23,000 people in Windsor-Essex, need NAFTA to move parts across the border, he said. They’ll face the impact first, and they’ll face the biggest impact.

If they move, they’ll take the Tier 2 suppliers and mould makers, like Laval, who “follow the herd.”

“It will be a slow draw on our exports, because we won’t be able to export the same way as we did before,” Azzopardi concluded.

Add to that corporate tax reductions in the U.S. “and you start to lose ground quickly,” he said.

The auto industry plans for five years from now, he said. Now, the worst-case scenario is a combination of tariffs and lower corporate taxes in the U.S. What if the Canadian dollar reaches par?

“Take all that and Canada is not such a good idea. The risk is too high. It’s just insurmountable.”

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Just how disastrous the end of NAFTA would be here would depend on whether there is another trade agreement, says auto analyst Dennis DesRosiers.

Production at the Windsor minivan plant and other plants that received significant investment recently won’t be disrupted in the short term, he said. Parts produced at those plants that cross the border multiple times will incur a net tariff of 2.5 per cent under the WTO. But they will still incur the tariff each time they cross and companies will have to apply for a rebate for each additional levy. That’s “a mess,” said DesRosiers.

“The biggest issue is the complexity of having a border,” he said.

“If you put the border back in, it creates a lot of inefficiency, and that adds cost,” DesRosiers said. “Any time you increase cost, you restrict the market.”

Canada’s auto industry already is struggling to maintain what it has, he said, echoing Azzopardi. It used to produce three million units a year. Now it struggles to produce two million. Auto exports to the U.S. and sales in Canada are projected to decline over the next five years because of decreasing demand due to aging baby boomers and millennials, who buy fewer vehicles because of ride-sharing. That will affect not only vehicle and parts makers, but a host of related sectors down to financial services and mechanics.

“Start adding all these complexities (due to the end of NAFTA), and it hastens the hollowing out of the auto sector in Canada,” DesRosiers said, adding: “It all adds up to a whole pile of not good.”

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Eliminating Mexico also “drastically” changes the auto industry, said Azzopardi, whose company is one of many in the Windsor area with plants in Mexico. Auto makers and Tier 1 suppliers need Mexico because of its low cost, he said. Without Mexico, the entire North American industry is less competitive.

That argument makes Unifor president Jerry Dias more concerned about NAFTA surviving.

“Now that’s a complete disaster,” he said.

The industry in Canada and its workers “couldn’t do worse” than they have under NAFTA, he said. The industry under NAFTA is built on the exploitation of Mexican workers, which has cost Canada investment and jobs. BMW plans to open a plant in Mexico next year paying workers $1.10 an hour. Mexican autoworkers can’t afford to buy the vehicles they build, he said.

“The auto industry — I don’t know how they look at themselves in the mirror every morning,” he said.

Four assembly plants have closed in Canada and eight have opened in Mexico, with plans for two more, including BMW. Mexico has eight per cent of the market and 45 per cent of the jobs. Before NAFTA, Canada had a trade surplus in manufacturing. Now it has a $120-billion deficit.

“No NAFTA is better than NAFTA in its current form by a long, long way,” he said. “There has to be a straightening out of the system.”

The U.S. will “absolutely, absolutely” deal with unfair competition because of low Mexican wages, imposing countervailing duties, he predicted, and Canada should, too.

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While NAFTA negotiators meet in Montreal, Windsor Mayor Drew Dilkens will join the Federation of Canadian Municipalities, its Big City Mayors’ Caucus and the Canadian Embassy in Washington. They’ll lobby members of Congress in the 35 states where Canada is the biggest export market. All members of the House of Representatives and some senators face elections in border states like Michigan that rely on the auto industry and trade with Canada.

“We’re trying to get to the senators in those states and the congress people in those states to say this will have a significant impact on your state — the population in your state, the cost of goods and the ability of goods to be sold,” said Dilkens.

The group is mirroring Prime Minister Justin Trudeau, cabinet members, premiers, diplomats and business leaders who have been lobbying U.S. decision-makers about the potential damage of terminating NAFTA. The hope is that they’ll pressure Trump.

The U.S auto industry, as well as agriculture there, are expected to take big hits without NAFTA, and that means “this battle will be fought within the United States, between U.S. stakeholders, Congress and the White House, as much if not more than between Canada and Mexico and the Trump Administration,” the C. D. Howe Institute’s report concludes.

Meanwhile, auto industry companies in Windsor-Essex won’t say publicly how much they could be affected, said Azzopardi. But “they’re all starting to strategize what post-NAFTA will look like. It’s pretty serious. There’s a lot of talking going on.”